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Compass, loanDepot IPO; Rocket pulls political $$$ 😬

By January 12, 2021 No Comments

Compass IPO; how much did loanDepot spend on marketing?

Compass has filed confidentially to go public, according to The Real Deal.
The residential brokerage, which has raised $1.5 billion from investors including SoftBank, said it submitted a draft registration statement with the U.S. Securities and Exchange Commission on Monday.

Here’s how they got to this point: “Founded by Robert Reffkin and Ori Allon on New York in 2012, Compass burst onto the scene by hiring top agents across the country and gobbling up market share,” the article states. “Even as rivals criticized aggressive recruiting tactics, Compass grew to more than 18,000 agents.”

loanDepot, which also filed for its IPO earlier this week, put down several reasons for its success. However, the big show stopper is how much money loanDepot invested in its marketing strategy to make it one of a kind in the super-competitive mortgage space (see bottom of Page 1).

“We believe that we are one of only two non-banks with a nationally-recognized consumer brand in the U.S. retail mortgage origination industry,” the filing states. “Since the Company’s launch in 2010, we have invested over $1.2 billion in marketing and the promotion of our brand, and we believe there are significant barriers-to-entry in creating a brand comparable to ours.”

If you do the math, that’s around $100 million of spend every year! But looking for prospects can be very time consuming: “During the last twelve months, we have analyzed, enriched, and optimized more than 9 million customer leads with a deep understanding of each potential customer’s financial profile and needs,” loanDepot states.

However, all of this IPO activity is bringing out the party pooper in industry analyst Chris Whalen on his Twitter: “This whole #SPAC craze reminds me a lot of the packaging of private label mortgages in the mid-2000s and leveraged loans more recently.  The #derivative asset machine on Wall Street always finds a way…” Oh well, can’t get everyone on board.

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Saw it coming: Rocket pulls political $$$

#1 mortgage retailer Rocket no doubt spent big on marketing too, but was also spending big on something else, but is now having a change of heart about that.

Yesterday’s Rise&Shred had a piece of content, dead last, that was titled: Major Mortgage Players Are Rethinking Political Donations. So it comes as no surprise that one of the major players, Rocket Mortgage, has suspended ALL political donations, in the wake of the recent Capital Riots.

However, they will fulfill their current donation obligations, according to local coverage.

Rocket Mortgage — a subsidiary of Quicken Loans under Rock Holdings Inc., which spent $2.7 million on political contributions in both parties in the 2020 cycle — said in a press release first reported by Crain's Detroit Business that it would contribute $750,000 to the federal inauguration committee, which will support events related to Biden's inauguration, and then suspend all political giving while it “contemplate(s) the role corporations play in the political process.”

“We were truly appalled and disheartened by the actions that took place at the U.S. Capitol last week,” CEO Jay Farner said in the statement. “Our country is at an important inflection point — one that will undoubtedly have a lasting impact for generations. It is more crucial than ever that we come together to demonstrate the ability to celebrate a centuries-old tradition of the peaceful transfer of power from one administration to the next.”

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Brace gets in on the Series B action

Also in yesterday’s Rise&Shred, we talked briefly about appraisal-tech company Reggora raising a ton of money, not on the stock market, but in Series B fundraising. They weren’t alone.

Brace, a digital mortgage-servicing platform, today announced that it raised an additional $15.7M in Series B funding led by Canvas Ventures. The investment round included participation from existing major investors, including Point72 Ventures and Crosslink Capital. The round closed in late 2020, just 10 months after Brace raised its Series A, bringing the Company's total funding to over $30M.

A Series B round generally takes place among private investor groups and is used when the company has accomplished certain milestones in developing its business and is past the initial startup phase of its lifecycle.

Brace has seen tremendous growth in 2020, adding a number of the largest mortgage servicers to its client base. “An enormous amount of value is locked inside legacy core systems, and in this past year the COVID-19 crisis has been a catalyst for speeding up innovation in servicing,” said Eric Rachmel, CEO of Brace, in a statement.

The Company will use the new funding to expand its team, broaden the suite of services it offers, and bolster future product initiatives.

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